Supply is falling: Bangalore retains its top position in the commercial space absorption list at 11.53 million sq.ft along with additional pre-commitments of 5 million sq. ft for next year.

The commercial space absorption in India rose eight per cent in 2011 to about 36 million sq. ft. Real estate consultant Cushman & Wakefield, however, cautioned that the vacancy level continues to be high at 18 per cent, despite a reduced supply flowing into the market now.

There was a drop of 20 per cent in the total supply entering the market as compared to the previous year, the report by Cushman & Wakefield said.

Bangalore continued to top the charts with highest absorption in the country at 11.53 million sq.ft along with additional pre commitments of 5 million sq. ft for next year.

Chennai and NCR also witnessed a considerable growth in the space usage during the year accounting for 32 per cent and 15 per cent, respectively, compared to the previous year, it said.

Mr Anurag Mathur, Managing Director of Cushman & Wakefield India, said that while the first half of 2011 had witnessed dynamic leasing activities, the second half was more subdued. “…The absorption could have been higher had several corporations not deferred their expansion plans in the second half of the year, in the light of weak economic sentiments in the Western markets,” he said.

IT, BPO and BFSI sectors, which are the key demand drivers and have the significant share of the absorption, have seen a clear slowdown in expansion plans, thereby affecting the demand, he pointed out. The non-IT absorption, on the other hand, registered a 30 per cent growth adding to the positive demand.

“Despite the impending uncertainty on the back of weak global cues, the growth in emerging economies is still expected to be seven per cent or more, which continues to drive the absorption in difficult times,” he said.

The total offices space supply was recorded at 34.63 million sq.ft, most of which was delivered in the first two quarters of the year. Cushman & Wakefield further said that the decline in supply could be attributed to a large pipeline of projects under construction coupled with lower pre-commitments in the latter part of the year on account of the uncertain economic scenario.

“The projected supply of 51 million sq.ft in the next year is likely to be controlled by the developers, who may alter the pace of construction to align with demand fluctuations. This may keep rentals under pressure leading to flat trend through most of the year,” Mr Mathur added.